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Ladies and gentlemen, good day, and welcome to NIIT Technologies' Q4 FY 2018 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhinandan Singh, Head, Investor Relations and M&A at NIIT Technologies. Thank you. And over to you, sir.
Good afternoon, everyone, and welcome to our Q4 FY 2018 earnings call. Present along with me today on this call are Mr. Rajendra S. Pawar, our Chairman; Mr. Arvind Thakur, our Vice Chairman and Managing Director; Mr. Sudhir Singh, our CEO; and Mr. Amit Garg, our CFO. [ You would have ] received our e-mail with the financial results for the quarter. The same are also available at our website www.niit-tech.com. We will begin today's forum with opening remarks by our leadership team, and then we will open the floor up for your questions. Before I hand over the floor to Sudhir, I would like to make one more quick announcement. You would have received invitations from our side for our Investor and Analysts meet that's happening next week on the 9th of May at our Greater Noida Campus, near New Delhi. So I just wanted to once again take this opportunity to invite you to our Analyst and Investor meet, because we intend to bring in, not just our top leadership team but also some business heads, including our digital, cloud, insurance and other businesses heads, all people from those businesses, who will showcase some of our capabilities to you. So I look forward to seeing you there on Wednesday. Since this event is going to happen at an excellent campus that we have, if you would like to attend, I encourage you to register by responding or dropping an e-mail with your confirmation. My e-mail address is abhinandan.singh@niit-tech.com. And with that, I would like to -- now like to hand over the floor to Sudhir Singh, our CEO. Over to Sudhir?
Thank you, Abhinandan, and a very good evening, and a very good morning to all of you folks. We are very pleased to report that our revenues have increased 4.3% over the previous quarter to INR 7,888 million. The constant currency growth during the quarter was also 4.3%. This quarterly revenue number represents an improvement of 5.9% over the same period last year. It is important to note that the company had concluded the consultation process with one of its government clients in quarter 4 of fiscal year '17, and that has resulted in a onetime revenue of INR 271 million in Q4 of fiscal year '17. Excluding the impact of that onetime settlement, revenues in this quarter have expanded 9.9% over the same quarter last year.Moving on, the EMEA region experienced robust expansion in revenues of 9% sequentially. And it now represents 32% of our revenue mix on account of the growth in digital engagements and NITL across EMEA. Americas grew 1%, despite a drop in revenues on expected lines from Morris. And this growth came on the back of growth in top insurance clients. It now contributes to 48% of our mix. India and APAC contribute 10% each to the total mix. Company continued to experience good traction in the BFSI segment, with revenues expanding 5.4% sequentially during the quarter. And this now contributes, BFSI as a segment, to 44% of our revenue mix. Revenues in Manufacturing, Media & Others increased sequentially by 6.8% due to seasonal increases in GIS revenues, and also ramp-up in our digital engagements. This segment now represents 30% of our overall revenues.Travel & Transportation, which had robust growth last quarter remained flat, as ramp-up from new clients got delayed. T&T now -- which is Travel & Transport, now contributes to 26% of our revenues. Our client concentration is now becoming more broad-based, with top 5 clients contributing to 29% of the total revenue and the top 10 and the top 20 clients contribute 40% and 54% of the total revenues, respectively. On-site revenues represents 61% of the total revenue.So moving on to the margin analysis now. Operating profits grew 9.4% sequentially to INR 1,417 million. As noted earlier, a onetime settlement boosted financials in the same quarter last year. As a result, reported operating profits show a 6.9% decline year-on-year. Excluding the impact of the onetime settlement, operating profit improved 12.4% over the same period last year.Operating margins improved sequentially by 85 basis points to 18%. On a constant-currency basis, operating margins stood at 18.3%. Growth driven by higher margin businesses like digital, GIS, NITL, along with lower SG&A due to operating efficiencies, resulted in this margin expansion. Net profits for the quarter are INR 861 million, up 13.7% quarter-on-quarter and down 14.2% year-on-year due to gains from the onetime settlement done last year. Effective tax rate during the quarter stood at 22.9%. I'll move on to order intake now. The order intake story remains very positive. We secured fresh business of USD 145 million during this quarter. This number represents a step jump in the order intake numbers that we have seen in the recent quarters. Out of this USD 145 million order intake in the quarter, the U.S. contributed USD 43 million, EMEA contributed USD 69 million and the rest of the world contributed USD 33 million. We signed 2 large deals in the quarter, and we are particularly pleased with the changing complexion of the large deals that we have secured during the quarter. The first large deal from London, is from a new client, and I repeat, a new client who has awarded us a USD 35 million managed service contract to run their IT back office infrastructure and to drive transformation of the infrastructure over the next 5 years. We see a clear runway to expand beyond this immediate intra-centric revenue stream into the applications and process spaces at this new client as well.The second large deal that we secured was in the U.S., with one of our DFS clients where we were doing BPM, Business Process Management, work. We have changed the complexion of that engagement to a robotic process-driven transaction-based pricing model as we secured this increased mandate. Moreover, 7 new customers were added during the quarter. Most of them in the western geographies, 2 of them were in the U.S., 4 of them were in EMEA and one of them was in the rest of the world. Order book executable over the next 12 minutes (sic) [ 12 months ] stands at USD 339 million. I'll now hand the floor over to Arvind. Arvind, all yours.
Thanks, Sudhir, and good evening, everybody. I just wanted to touch upon the entire financial year. And the highlight of the financial year has been the vastly improved deal inflow with order intake improving steadily in each quarter.We had USD 110 million in quarter 1, USD 122 million in quarter 2, USD 130 million in quarter 3. And now topping the years with an intake of USD 145 million in the last quarter, which Sudhir just described. Likewise, the additional new logos, too, have seen consistent improvement, with new logos ranging between 7 to 9 per quarter, which was typically 3 to 5 in the previous years. Large deals also have significantly increased, we closed 7 large deals, with deal flows in every quarter improving. So the first 2 quarters had 1 large deal each and the last 2 had 3 and 2, respectively. So all in all, a very good story in terms of deal momentum throughout the last financial year. We have continued to strongly grow our digital portfolio. Our digital portfolio now contributes to 24% of our overall business during the financial year. And we saw a growth of 27% in this portfolio over the previous year. We continue to create propositions at the intersection of digital technology, and industry orgs with a focus on digital integration and customer experience. So all in all, revenues stood at INR 29,914 million for the year, representing a 6.8% growth over last year. Currently, it had an adverse impact on reported revenues. In constant currency, growth for the year has been 9.7%. Operating profits increased by 3.5% during the year to INR 5,012 million. Operating margins stood at 16.8% for the year. If I exclude the adverse impact of currency, margins in constant currency stood at 17.4%. Net profits increased by 12.1% over last year to INR 2,802 million. Tax rate was 23.5% of PBT.During the year, the company made significant investments in strengthening the front-end, sales as well as its delivery capabilities. As we shared in the last call, we added many new leaders from Tier 1 organizations to drive the business. We have had early transition to the new leadership with Sudhir at the helm. And as we embark on our next phase of growth, there are some significant changes that Sudhir is making to the organization, which I'll now ask him to share with you. Over to you, Sudhir.
Thank you, Amit. So moving on folks, we concluded our fundamental organization restructuring exercise last quarter that Arvind just talked about. As part of this exercise, we have reorganized ourselves as a vertical-centric organization from being a geocentric organization. We now operate as a set of units focused on travel, insurance and BFS, which are our key focus verticals. As part of this reorganization, sales, presales and core ADM delivery has been aligned under business leaders, who are all based in the market.The insurance business is now headed by Anurag Chauhan, who was the Managing Director at Accenture and has joined us in New Jersey last quarter. The BFS business will be run by Gautam Samanta, who is ex from -- who is ex-Capgemini and Infosys, and is based in London. In addition to these integrated market-facing business units, we have also created a formal Robotic Process Automation, RPA service line, under a new leader who had joined us from Cognizant. We've created a cloud services line under an ex-Microsoft veteran. And the recently formed data and automation service line is also taking shape now. Finally, from a capability perspective, we have created a formal Chief Technology Officer, CTO org structure to focus on block chain, IoT and cognitive computing. The fundamental principles underpinning this reorganization were centered around, further accelerating revenue growth, enhancing our market impact, moving the center of gravity of our leadership to the markets and creating new growth vectors for the firm. Moving on to people, there was an increase in headcount by 342 during the quarter. Total headcount at the end of the quarter was 9,423. Utilization during the quarter was 79.5%. Attrition stood at 10.5%.Balance sheet data. Cash and bank balances stood at INR 8,057 million, an increase of INR 1,151 million over the previous quarter. And an increase of INR 737 million over the previous year. The CapEx spend during the quarter was INR 162 million. Day sales at the end of the quarter stand at 70 days of sales outstanding. Last quarter, again, was 70 days. Hedge position. Outstanding hedges in the U.S. -- in USD are USD 65.25 million at an average rate of INR 66.9 to the U.S. dollar. In GBP we have GBP 13.05 million outstanding at INR 90.2 to the pound. And in euro, it is EUR 4.5 million at INR 79.68 to the euro.Finally, the outlook section. The macro environment has been relatively stable since we spoke to you in January, although there has been some uptrend in oil prices and weakening of the rupee. From our vantage, we see positive demand for our services across all the 3 industries: insurance, BFS and travel that we operate at. The budgetary spend outlay for the calendar year across most of our top 20 clients is strong, and is indeed much stronger than what we have seen at the start of the previous years. Specifically, in travel, the IATA, which is the International Air Transport Association, expects 2018 to be a healthy growth year for the airline industry, with the economic momentum supporting driving passenger demand in 2018. The insurance sector continues to spend on technology with 3 overarching trends: digitization, data analytics, and legacy and ecosystem transformation. And the African wealth management space, which is what we are primarily focused across in the BFS industry, has budgeted significant spend growth in the regulatory and innovation spend domains. Overall, the financial year has ended on a strong note, with robust sequential performance across all financial parameters in the quarter. There has been, as you would have noticed, a significant improvement in deal flow. The growth momentum, again, that has been building up over the past few quarters backed by a strong pipeline of large deal closures and new logo additions, give us the confidence of strong growth during fiscal year '19. Our confidence in our plans for double-digit organic growth in constant currency for fiscal year '19 has trended. Despite Q1 being a seasonally weak quarter for us, due to declining GIS businesses, and residual fall in Morris' revenues, we still expect revenues in quarter 1 fiscal year '19 to be better, better than quarter 4 fiscal year '18 in constant currency terms. That is all from my end. Abhinandan, back to you.
So thanks, Sudhir. Thanks, Arvind. I think we can now open the floor for question-and-answer session, please. Moderator, if you could please do the needful.
[Operator Instructions] The first question is from the line of Govind Agarwal from Antique Stockbroking.
I have 2 questions. One is on order intake. It has been pretty strong in the last few quarters, so what is driving this order intake? And what gives you confidence to maintain this trajectory, can it further improve in FY '19?
Sure. Thank you for the question, Govind. We believe order is driving order intake is a set of measures that we've put in place over the past few quarters. We've talked in the past about the leadership change and the enhanced -- significantly enhanced focus when it comes on front-end sales, presales and capability built to drive the order intake that you have seen. We have changed incentive structures recently for the front-end sales team that also is driving behavior. We've talked in the past around having changed the center of gravity of the leadership to the markets, that is a contributing factor. And finally, execution, which is just monitoring number of calls, number of meetings, closure of conversations, in general, hunger for closing deals. The cultural aspect of performance ethic has also got addressed. That's being the front-end market facing schema. At the back end, some of the capability vectors that we talked about around data and automation, around digital are resonating, resonating well for us. Digital for us is a transformation story at the intersection of technology and industry that Arvind talked about. That again, has been received well. So it's been a combination of a sharply focused front-end along with a capability set that seems to be resonating and doing well. The second part of your question was, do we feel confident that the order intake will continue to be strong? And I think the short answer to that is yes. We feel confident that the order intake will continue to be strong.
Okay. Okay. And another one, if I may ask you. See, on the growth for FY '19, since we have a very good order intake in all the 4 quarters of FY '18. Can we expect higher growth in FY '19 than FY '18? And also, can we expect margin improvement on a year-over-year basis?
So as I said towards the end as well, Arvind -- sorry, Govind. We do expect at least double-digit organic growth in constant currency terms. We are planning for it. Which, again, you will see is higher than the number that we've reported in this quarter. So the answer to that question is yes. We expect to do better. And we do expect to increase margins as well. So both revenues and margins, the answer, again, would be yes.
Okay. Okay. If I may ask one more, see, you -- will you increase stake in Incessant in current year, in FY '19 and FY '20?
Can you repeat the question, please, Govind?
No, in Incessant, how much stake will you increase in FY '19 and FY '20?
Arvind, do you want to take that?
How much what? I didn't understand.
How much stake was the question. So we are planning to buy another 20% in May of this year, calendar year. And the remaining 10% in May of next calendar year, Govind.
Okay. And what was the payout for these purchases?
Yes. So overall, at this point in time, as you'll see from the balance sheet, we budgeted INR 294 crores against future acquisition liabilities. Out of that INR 155 crores for across Incessant and RuleTek will be paid out in May of this year. The remaining amount is an estimate based on what we project as their performance over the next to 2 years.
The next question is from the line of Sandeep Shah from CIMB.
Just, Sudhir, in terms of the reorg of the organization, is it largely done? Or do you believe still there are a few things need to be done, and what could be those going forward?
Yes, Sandeep, thanks for the question. From our vantage, the things that we think have being helping us drive the growth has been one, of course, the structure change that we've just put in place. The second piece has been the leadership augmentation that we've done at the front end. And the third, something that will take us more over time is the incentive structure change that's being done. So if I look at the org structure, I think we have after the restructuring in the last quarter arrived at the org structure that will be stable now moving forward. In terms of leadership, we've talked about this in the past. And we continue to stress on the fact that the leadership hiring and augmentation continues. It will continue, though we feel very pleased with the quality of the hires over the last year across quarters. So summarizing, structure as of now after the last reorg is stable. And we think that is going to be the structure we will roll with. Leadership hiring, again, very pleased with the number and the quality of Tier 1 hires we have done, but that will continue to be an ongoing process across levels that we will work on.
Okay. So will this lead to any further investment in SG&A? Or will you like to compromise margin in -- for a growth in the near term, which may benefit you in the long term?
We will not compromise margin. We will not compromise margin in term -- this year, we expect margin to go up. Though, obviously, the investment around sales hiring will go up, but we will maintain margins. And at an aggregate level we will contain SG&A.
Okay. Okay. Second, Sudhir, I think you had a target of doing 7 to 10 new client additions, which you have been doing. And also in terms of at least adding 2 large deals every quarter, which has also been done. So you're clearly walking the talk. So these targets continues to remain going forward and you remain confident that with the addition of the senior management, this targets have more upside potential rather than being stagnant?
We continue to be confident, Sandeep. I think, as you said, we walk the talk over the past few quarters. We are absolutely committed to making sure that we continue to walk the talk. But the number of 7 that you've seen, we believe is a sustainable number on an average, obviously, there can be variations seasonally. But on an average, the number of 7 that you're looking at is clearly a number that we believe is absolutely sustainable on a go-forward basis.
Okay. Okay. And second, sir, in terms of Travel & Transportation, some of your peers have registered a good growth in FY '18, but for us, like NIIT Tech, there were some client-specific issues. So in FY '19 you believe it could be a good driver for you?
I believe very strongly, Sandeep, that FY '19 travel will grow. And it will be a growth driver for us. If you actually look at the travel vertical, it's interesting. Last quarter, quarter 3 travel did grow after many quarters sequentially at 4.4%. This quarter, it's been flat. And I honestly expected it to grow. But a lot of the pipeline that we've built up, the ramp up was slightly delayed. But effective quarter 1 itself, we hope to see a turnaround and at an yearly level, we absolutely expect travel to be a growth side.
So one of the busiest airport which is added as a client. Is it in the western market or in the Asia market?
It's in the EMEA region.
EMEA region. Okay. Okay. I have a few bookkeeping questions. So I think on the acquisition liability, there is a considerable increase of close to INR 90 crores, INR 95 crores. So I do agree this could be in terms of revaluing the earnout payments to the Incessant. So I think based on my calculation, Incessant including RuleTek might have shown more than 50% Y-o-Y growth. So you believe that with increase in the valuation, this growth potential may continue going forward -- the momentum will continue going forward?
So -- and we do share the revenue numbers on a quarterly basis, Sandeep. What Incessant and RuleTek together have done this quarter for us is INR 1,009 million. You also know the last quarter numbers, which was INR 832 million. So Incessant, RuleTek as a growth story, obviously, has been a great story for us over the past few years. So it's not 50%, it's a very, very robust, very substantial growth. And you're absolutely right. The increase in the future acquisition liability that you're looking at is on account of significant ramp up in the digital engagements at Incessant and RuleTek. We expect the momentum to continue. And that's the reason -- that's the other reason why you see that our future acquisition liability on the balance date -- on the balance sheet that we have has been increased.
So this increase in liability also takes into account the future growth and not just the growth which is achieved, right?
Absolutely, Sandeep. You're absolutely right. We expect strong growth from these 2 organizations, and that increase builds that in all.
Okay. Okay. Just on the cash repatriation. Last year we had some amount, which has been repatriated from foreign subsidiary to India. Will that happen with the dividend payment, which is due in 1Q?
Yes, that will be done. This is Amit here. That we'll be following the same strategy this year also.
[Operator Instructions] The next question is from the line of [ Ganesh Shetty ] as an individual investor.
So just want to ask one question regarding the new deals, whether they're coming with price comfort and better margin, especially the larger ones? Can you please throw some light on this, sir?
Yes, Mr. Shetty, the deals are coming at broadly the same margin that the business has, that the rest of the business has.
Sir, my second question is regarding our inorganic growth strategy. As we have done a very good acquisition in the past, like RuleTek and Incessant. Are we looking for any further acquisition in digital space for strengthening our digital offerings?
Yes. So, Mr. Shetty, we will continue to be on the lookout for attractive opportunities, as we always are and as we have in the past. So our position there has not changed. We will continue to look at the market if we find something that is interesting and synergistic, we will go for it.
Yes, sir, I also congratulate you for the best attrition rate of 10.5%. I think this is the best ever we have ever achieved. Can you throw some light on this, sir? How the tide may be in the future for attrition and the talent attaining? Can you please throw some light on this?
Ganesh, it's Arvind here. As you know, we have a very strong focus on our people. And particularly, since our Genesis has been from NIIT, we are a very strong learning organization. The motivation characteristics of technical people is unique. We're not driven as much by compensation, compensation has to be aligned to the market and be fair and equitable. But what we're really looking at is to be current in terms of the knowledge as well as the ability to work on exciting new engagements. So the strong emphasis in the organization, as a learning organization, to invest in development of people, which is what keeps them motivated and engaged with the organization.
The next question is from the line of Rahul Jain from Emkay Global.
Just one thing, there is one this data that we give on 12-month executable book. This number is up 6% for this quarter or maybe on a Y-o-Y basis. If we see this 6% growth, and we try to correlate in terms of the commentary that we would possibly grow at double-digit rate, and we also talk about growth in the client spend in the top 20 front. So how we try and correlate this from a existing order book perspective? Or this is more to be driven from a pipeline, given the kind of spend they're going to do and our ability to win those contracts?
Yes. So if -- let me just attempt and answer that question. If you look at our order intake that's USD 145 million for the year, I know you were referring to the executables over the next year. There are 2 things that we need to bake in there. If you want to do a simple arithmetic and actually just do -- look at -- add up the order intake over the last 1 year that number comes to $507 million. What has happened is 2 things: one, in the order executable, there is some impact with a modest drawdown that we had called out 2 quarters back. More importantly, the nature of work that we are getting and the contribution of digital to our aggregate revenues has been climbing up very, very sharply. Digital today is about a quarter of our global revenues. And digital, as you know, tends to be a revenue stream that tends to be shorter term and not at 3-, 5-, or a 7-year cycle. Hence, while the order intake is very healthy, the order executable is not reflecting that entire increase into the cumulative number.
So, I mean, my question was other way round. If you see this 12-month executable order book of 6% growth gives me clear visibility that this 6% growth on this base is going to come over the next 4 quarters. And if I have to correlate this with a double-digit number, that incremental number would come from the digital pocket, which you just spoke about. So is that a significant contributor to this? And secondly, if we see our incremental revenue for this year, more than 50% of this revenue has come from Incessant. So do we see that, that traction would be more, again, driven by that subsidiary or it would be more uniform across?
So the answer to your first question is you're absolutely right. It is digital revenue stream that is going up. That is going to account for the big differentiation. The answer to the second question is that we expect Incessant and RuleTek, as I said, to continue to grow robustly, but the growth will be more evenly spread out. We do not anticipate anywhere close to half of our absolute growth coming from Incessant and RuleTek. We expect the growth in fiscal year '19 to be more broad-based.
Okay. And on the comment that you said that the top 20 client budget or their view on their spend looks good. So is it more to do with their actual commitment on your project they are going to pursue? Or is it to do with more wallet-share kind a thing in those customer for us?
I think it's a mix of both Mr. Jain. So as I said, at this point every year, right, at the beginning of our calendar year, calendar year or at the end of the first quarter of a calendar year, we start getting very good sense in terms of what the budgetary spend around technology for clients is. This year, we find that the spend numbers that have been budgeted by our top 20 client organizations, on an average, seem to be materially higher than the numbers that they used to have at the same time in the previous calendar years. So that is one reason why we find the outlook to be clearly positive. The other reason why we find the outlook to be positive, is the growth momentum that we are seeing is now more evenly spread across our top 20 clients as well. And we expect our wallet-share across these top 20 clients, also to go up as we target the growth numbers that I've talked about.
And lastly, if you could share what could be this growth in this top 20 on the budget perspective?
Are you saying, what is the growth that we expect from our top 20 clients, Mr. Jain?
No. So their spend data, which you're saying is up Y-o-Y, so is this number up by about -- whatever 2%, 5%, 10%?
It's a very disparate number, Mr. Jain, because it largely comes from 3 different industries. But whether it is travel, whether it is wealth and asset management, and whether it is Insurance PNC, it is up all across is what we've got.
The next question is from the line of Sandeep Shah from CIMB.
I think I got cut off in the last question. Just -- so we are expecting a cash repatriation in the 1Q as well, right? And the quantum could be similar on a Y-o-Y?
Yes, more or less same.
Okay. Okay. And just on the GIS side, on a Y-o-Y basis, there is a decline. So is it the administration or procurement issues, which we were facing are largely behind, and it could be on a Y-o-Y growth trajectory in FY '19?
That's right. That's absolutely correct. So as we had shared with you, the procurement process has shifted from DGS&D to the new GeM's platform. And it took a while before our products and services could be registered on their platform, which prevented procurement activities to be carried out. But now that has happened, and so we can expect a growth in GIS in this year.
Okay. Okay. And just 2 things. The absolute CapEx, the fixed asset CapEx, which we expect in FY '19, excluding the payouts, which we may be making for the acquisition, and what could be the tax rate for FY '19?
We expect the tax rate to be in the range of 24.5%.
24.5%. Okay. And the pure CapEx, the -- excluding the payouts for the acquisition?
Around INR 75 crores, we believe, should be the number.
INR 25 crores?
INR 75 crores.
How much?
INR 75 crores, Sandeep.
[Operator Instructions] It's a follow-up question from the line of Rahul Jain from Emkay Global.
So you mentioned the incentive program that would be a next step forward in terms of the process that you have initiated from reorg and leadership development. So if you could share your thoughts on that, how it would be linked and aligned? And how you think should help us in building the momentum?
Yes, Mr. Jain, so there are a few important aspects that underpin the incentive and the goals, the goal setting structure that we have. And incentive and goal setting, as you recognize, are linked. The first thing that we've done is, we've very clearly called out, very sharp number-based large deal goals for sales leaders, large deal goals. And we have significantly increased by a factor of about 2.5, the payouts to be made in the event of a large deal realization. You will recall that in fiscal year '18, we have signed 7 large deals, and it is our intent to grow that number. The second thing that we have done is that we have increased accelerators for key parameters around revenue and margin for sales leaders who will be in the market to incentivize them further to move the revenue vector. Those from our perspective are the 2 biggest changes done to the incentive structure policy. Goal sheets also as part of this process have been significantly rationalized. The number of parameters has been limited. And revenue and margin have been prioritized very, very highly with stronger payouts for overachievement, again, in these numbers.
Understood. And if you could share the segmental revenue, which we typically share on [indiscernible].
Absolutely. The quarter 4 number for NMTL was INR 289 million. The quarter 4 number for GIS was INR 424 million. The quarter 4 number for Incessant and RuleTek together was INR 1,009 million. The quarter 4 revenue number for NITL was INR 444 million.
And respective margins?
The margins were for NMTL 14%, GIS 30%, Incessant plus RuleTek taken together 25%, and for NITL 24%.
The next question is from the line of Pankaj Kapoor from JM Financial.
A couple of questions, Sudhir. First, will it be possible for you to give a sense of the order booking, what would be the percentage of digital deals? And can you give a comparable number, how it was last year same quarter? That's the first question. And second question, with the higher incentives for the sales teams, do you think this can put some pressure -- this should lead to a higher SG&A expenses? So when you -- the commentary that you made of margins improving, is that factored into that?
Thanks, Pankaj. Getting back to the first question around digital deals contribution to the INR 145 million, we do not have that breakup by digital versus non-digital. Though interestingly, the digital component in the 2 large deals that we talked about was very, very high. Specific to the second question, we have built-in potential incentive payouts, against materially higher revenues to the sales people under the incentive structure in our margin calculation. And after having built-in, we remain confident that margins will go up next year.
The next question is from the line of Ashish Chopra from Motilal Oswal Securities.
As we -- just in terms of the margins. So should the trajectory also be similar to the previous years, wherein we do tend to typically see a fairly sharp drop in the first quarter because our base hikes are all at one go. And then it kind of builds through the course of the year? Or would you expect it to be slightly different with the anticipation of revenue spread across quarters?
Thanks for the question, Ashish. We expect the seasonality in quarter 1 to play out, which is what you referred to. We expect the trajectory to be the same, though the absolute data points to be higher for the year.
And just secondly, from my side, as far as the Travel & Transportation vertical goals, so while the outlook based on the current budget outlook -- outlays remains very positive. But do you see, I mean, we've had seen some volatility in that spending with respect to macro indicator, such as oil prices, et cetera. Would you tend to foresee that as a risk? Or given the kind of programs that you're witnessing the spending go in, you would think that would not really be much of an issue?
No. On travel, Ashish, we see some very key growth drivers for the industry itself, right, beyond just the macro number that I -- macro indicator that I've talked about around passenger travel. Travel right now is actually undergoing, as an industry, a very, very significant digital-led transformation. Whether it's airlines, whether it's airports, or whether it is the travel tech firms, all of it seems to be centered around the digital base transformation. And the deals that we had cooking and in the pipeline, which we expect to start realizing revenue against starting from the short-term itself are deals that are actually coming from that side of the demand cycle. So travel, as I said, we expect the growth to come in. And we expect the growth to come in on the back of very strong demand, from the Travel & Transport sector around digital-led business transformation.
Got it. And lastly, from my side, if you could just share or throw some light on the rationale behind extending the -- now it's -- for Incessant by an additional year versus the 30% that was scheduled to be acquired in terms of stake in this year itself, just a thought on this? Again, that would be helpful.
So I'll attempt to answer that question. Basically we're looking at a leadership change in Incessant. And we felt it was prudent for the founders to continue for another year, and that's why we restructured that, so that they're incented to stay on for another year. The new leaders are already in place, but it's good to have an overlap with the founders so that we continue with the growth momentum.
The next question is from the line of Govind Agarwal from Antique Stockbroking.
See, if you could share the profit contribution from Morris, from Incessant and from GIS business for FY '18?
You're talking about the margins, right, Mr. Agarwal?
No, no, no, not the margins. I'm asking about the net profit to arrive at the monetary interest number?
That is normally captured in the statutory books, Mr. Agarwal. These are business numbers that we've shared with you right now, and that's going to come in the results that we'll share with you.
Sure. Sure. Okay. Okay. And the other thing, see, if you could share some color on the ramp up of the large deals which you signed in the last few quarters, you signed almost 9 deals in the last 3 quarters. So how was the ramp up, if you could give some schedule on Q1, Q2 or how is the rhythm in FY '19? That would be helpful.
Absolutely, Mr. Agarwal. So if I look at the 2 most recent ones which we signed, I talked about a $35 million new order from a new client. The ramp up of that is underway. The transition is happening as we speak. And we will start realizing the revenues starting the quarter that we're in right now. The other deal that I talked about from quarter 4, which was an RPA-driven pay-as-you-use transaction-based model, also kicks in starting quarter 1 of this year itself. You're right. The large deal momentum has been building up. We signed 2 large deals in quarter 4. You will recall, we signed 3 large deals in quarter 3, and we signed 1 each in quarter 2 and quarter 1 of last year. The deals that we signed in quarter 3, one of them was centered around insurance. That deal, again, the transition has been over and revenue has already started flowing into our books in quarter 4. So all the Q3, Q2 and Q1 deals, the steady-state revenue has started getting realized. The Q4 large deal, their steady-state revenue will start flowing in starting Q1. The revenue uptick that you've seen quarter-on-quarter for the last 3 quarters, has also been a function of these large deals, and the revenue is getting baked.
Okay. Okay. Anyway, always you've been giving a number of how many deals you'll sign in every quarter, so if you could share the number this time also?
Absolutely. We signed 2 large deals in the last quarter. Is your question how many will be signed in the next quarter?
Yes, yes, yes. You've been sharing this number for the last few quarters.
Yes, Mr. Agarwal. So I'll attend that. Thank you for asking that question. And I'm smiling as I answer. So if you look at the overall last year, the 4 quarters Mr. Agarwal, we signed 7 deals overall: in quarter 1, 1; quarter 2, 1; quarter 3, 3; quarter 4, 2. You will recognize that there can be some ups and downs in terms of quarter-specific deal signing. But against the 7 that we signed last year, we feel we will sign at least a higher number than 7 in the year that is coming in. So it's going to be a higher number that is what I can commit to now, a larger number than 7.
We have a follow-up question from the line of Sandeep Shah from CIMB.
Just, Sudhir, I think, the client mining to be one of the areas which is like a work-in-progress for NIIT Tech, though of late it has been improving. So in your reorg, what kind of a solution you are putting in terms of client mining. Can you just give some color on that?
Yes, Sandeep, so 2 or 3 flavors around client mining. One, the fact that we've restructured ourselves more around a vertical-centric organization, means that the domain injection into the existing large clients will increase. We found out through our experience that it's far more relatable for a client to have a client partner walking and talking industry impact rather than talk technology only. So that transformation and that pivot helps us on that front. The second thing that we're doing is, as part of the larger leadership augmentation at the front end, we have very closely, over the last 2 quarters, being looking at the client partners that we have, servicing our top 20 clients. The process that I talked about around business unit heads, newer faces being added and augmented to the team. It's something that is already underway across the top 10 accounts as we speak. So we are adding newer, fresher talent to the existing front-end client teams and that process will continue to move ahead.
Okay. Okay. And second in terms of Incessant, I think it's driving a strong growth, and it's likely to remain a driver. So can you give some color because when we acquired Incessant it was a more of BFS heavy. So can you give some color in terms of their cross-selling to different verticals to your existing accounts and the integration of their sales team with your sales team?
Absolutely, Sandeep. So if I were to look at the integration aspect of Incessant and, also, the RuleTek subsequent acquisition that Incessant did. That's a process that's got materially very significantly accelerated in the last 1 year. The cross-sell across -- the cross-sell of Incessant and RuleTek capabilities, particularly Incessant into NIIT Technologies' clients have got accelerated. The biggest successes that we've noticed to date have come from the insurance vertical. BFS is a space where we have a lot of promise that we see coming in. And we have already had an outreach from the product company itself, which they're centered around, to try to co-create a travel story across NIIT Technologies and the product that they have competence around. So short answer to your question, the cross-sell has become very effective. And the cross-sell now has real legs because that has resulted in a lot of the growth that the Incessant and RuleTek combined entity has shown us.
Okay. Okay. And just on the large deals, I think, it's very encouraging to see increasing numbers. So, Sudhir, is it more organic focus or also tie-ups with the adviser is helping you, so what is driving this confidence and the momentum?
So, Sandeep, our observation is that the really large deals, which used to be in the market, right, the INR 100 million, INR 200 million, INR 300 million, INR 400 million deals that number is strong, and that was the number that was largely adviser driven. Large deals, as we've shared with you in the past, for us are USD 20 million deals. As of now, we have in our pipeline a few large deals where we are in conversations along with advisers who pulled us in. But the recent large deals, the 2 that I talked about, were large deals that we created with our sales and capability teams working together. There are some -- we have incidentally, to your question, the one piece that I miss talking about is as part of our restructuring, we have created an internal organization, which is focused on partnerships and alliances, under one of our senior most leaders. And that is an organization that we regard as being another growth vector for us, which will create more structured and sharper alliances, both with deal advisers and with product players. And hopefully, we have another channel for driving growth.
Okay. Okay. And just last question, I think, mid-cap companies with a high client concentration generally face client-specific issue on a recurring basis. So on entering FY '19, do you believe this could be a risk, which can impact your growth? Are you any kind of such discussion with any of your clients happening, or which may give you some negative surprise?
No. The answer there, Sandeep, is a very emphatic no. We see no risk to the existing top 20 client set that they are working with around relationship on traveling. We see very strong material upsides. Some of it is driven by the macroeconomic environment. We think a lot of it is also driven by the work that we've done around mining, around leadership changes, around incentive changes, and around a sharpening of focus around the domain depth of our organization.
[Operator Instructions] Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to Mr. Sudhir Singh, CEO NIIT Technologies, for closing comments. Thank you. And over to you, sir.
Thank you. And I want to thank everyone of you folks. I know it's late in the evening, especially for the folks who are out here in India. Thank you very much for making time for this conversation. We are looking forward to meeting and hosting all of you at our campus in Greater Noida, next Wednesday on the 9th of May. And we would love it if you were able to make it there in big numbers. Thank you, once again.
Thank you very much. Ladies and gentlemen, on behalf of NIIT Technologies, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.